This Is More Like GST 1.2 Than 2.0

The 56th GST Council meeting unveiled goods and services tax reforms labelled 'GST 2.0'.

- SALEM DHARANIDHARAN

Listening to the longstanding demand of consumers, the changes collapse the multi-tier tax structure into a dual-slab model of 5 percent for essentials, 18 percent for most other goods and services, and a 40 percent rate targeting 'sin goods'. As the GST system was flawed, any change to simplify and rationalise it is a welcome step. But the question to ask here is: is it sufficient?

India expects a 7.8 percent real GDP growth in the first quarter of 2025-26, painting an optimistic picture. But it masks deep economic challenges as GDP as a metric fails to capture rising inequality, weak consumer demand and high unemployment.

For nearly a decade, sluggish consumer demand has plagued India. This is evident in some of the latest numbers available for a few bellwether industries—urban consumer goods growth slowed to 2.6 percent during January-March 2025, passenger car sales slumped 1.4 percent in the next quarter, and two-wheeler sales shrank 6.48 percent in July, over comparable periods in 2024.

One of the major reasons for low consumption is increased inequality, as it reduces money in the hands of the far more populous poor and transfers it to the tiny group of the super-rich. A 2024 Oxfam report claimed that the richest 21 people in India held as much wealth as the bottom 70 crore people put together.